Transfer of a going concern (§ 1 para. 1a UStG)

§ 1 para. 1a of the German VAT Act (UStG) exempts the transfer of a business, or a separately run business unit, in its entirety from VAT where the buyer takes over the essential assets and continues the existing business activity in comparable form. Legal effect: the transaction is „outside the scope of VAT” — no VAT line on the invoice, and the buyer steps into the seller's VAT position (including input-VAT adjustment periods under § 15a UStG).

In asset deals out of ongoing insolvency, a transfer of a going concern (GiG) is the most common case whenever a going-concern sale succeeds: administrator and buyer transfer inventory, customer relationships, contracts and staff bundled as a continuable unit. If only individual assets are monetised instead (break-up, piecemeal sale without the buyer intending continuation), § 1 para. 1a UStG typically does not apply — the price is then subject to VAT.

For buyers, the GiG classification has real cash-flow stakes: if it doesn't apply and VAT is overlooked in the purchase agreement, a later tax audit can assess VAT retroactively — against the buyer, with no realistic recourse to an estate already distributed. Standard practice is an explicit tax classification in the purchase agreement plus, where uncertain, a VAT gross-up clause covering a differing tax-office view.